Be Wary

232
Thu, Dec 8, 2011 - 4:51pm

It's been a crazy day. Sorry that it has taken me this long to update but the first chance I've had.

First of all, I hope that all of you saw this from last night's post. For simplicity's sake, here's a C&P:

"First, read this:

https://www.gata.org/node/10746

One of the things we failed to notice prior to the unexpected beatdown in gold in September was that lease rates had moved significantly into negative territory prior to the attack. One of the articles we referenced back then was this one, linked below:

https://ftalphaville.ft.com/blog/2011/09/14/677021/why-gold-forward-rate-inversion-is-important/

Anyway, here's the point. At -0.5%, lease rates are again near the level they were when gold was savagely attacked last September. One could say that the current, European dollar funding shortage is to blame. Maybe it is and maybe this is just a temporary phenomenon that will not impact the short-term price of gold. However, maybe its a precursor of another big selloff. The banks on the other end of the lease can use the borrowed gold to flood the market with sell orders. I took a bit of grief for not accurately predicting and warning of the September massacre. It gold crashes again over the next few days, don't say you weren't warned this time."

As if on cue, the PMs were savagely beaten today. Gold is off about $50 from its intraday high. Silver is down about $1.50. Is this the next stage of the same, coordinated, central bank, negative lease rate selling like we saw in September? Apparently, I'm not the only one who thinks so:

https://www.zerohedge.com/news/mni-reports-coordinated-central-bank-intervention-sends-gold-lower-intraday

Look, I know that I just gave you a rather optimistic forecast for December. That was based, however, on what we knew at the time and the current position of the charts. Listen to me now: BE VERY CAREFUL. If you are foolish enough to be trading leveraged, paper metal on the Comex, trying to make some Christmas fiat, BE VERY CAREFUL. Gold, in particular, is in a very precarious position.

You all know of the importance I place on 1705-1710. Well, now that level also corresponds with the lower trendline of the pennant from the September lows. IF 1705 gets taken out overnight or tomorrow (which appears highly likely), buyers will pull bids and gold will rapidly drop toward 1680. IF 1680 fails, gold could fall all the way to 1550. If you are long futures or even something like the UGL and gold falls $150, you're going to get your ass kicked. So, let me say this again for emphasis: BE VERY CAREFUL and watch the 1705 level VERY CLOSELY.

Silver is on pretty shaky ground, too. At this point, I can't imagine it not going to 31 and, if 31 fails, it's going to test the lower end of its range near 30. IF that happens and 30 fails, we may finally see the drop all the way to the long-term trendline that we discussed off and on for the past several months. A drop of this magnitude would take silver all of the way to $25. Again, BE VERY CAREFUL.

OK, onto some other important stuff.

One of the reasons I got behind schedule today is this:

https://silverdoctors.blogspot.com/2011/12/jim-willie-jp-morgan-crashed-mf-global.html

I read this and thought...well, screw it, I'll call Jim myself. We finally connected a few hours ago and we spent a little over an hour discussing current events. Like Santa, Jim is very concerned that the MFing Global situation is going to cause a system-wide crash of epic proportions. This idea of "rehypothecation" MUST BE STOPPED! If it is allowed to continue, a precedent will have been set that enables creditor firms to raid and steal your assets.

Let me explain. Recall that the bankruptcy law changes of 2005 reordered the subordination of creditors. It used to be that bondholders were the most senior of creditors in a bankruptcy. Now, derivative holders are the most senior...senior even to bondholders! If there was ever a more devious, pro-WallSt law created, I'm not sure I've seen it. Anyway...if a firm comingles or "rehypothecates" its assets with clients assets and then uses these funds to buy CDS, the derivative (credit default swap) holder (counterparty) can lay claim to the brokerage or clearing firms assets if that firm declares bankruptcy. Not just the firm's assets but their clients' assets, as well. This is the justification that JPM is using for stealing the MFing Global clients' funds.

If this is allowed to stand, the next time a firm fails (think BoA or Wells or Citi or any bank, broker or mutual fund company), a company like JPM or whomever is the counterparty on the bankrupt organization's CDS, will have precedent to step in and keep (steal) client money to settle their claims. THIS IS OUTRAGEOUS!

I mentioned above that the conversations that Jim and I have are off the record. He did allow me this one quote, however: "If you have money invested anywhere, leave only the amount of money in the system that you are willing (or intend) to lose." Your ultimate risk is that you may wake up one day and find that your life savings have simply vanished.

Look, I could be all wrong about this. Maybe everything will be OK. Maybe this rehypothecation thing is no big deal at all. Please don't take my word for it and then act in haste. Do your own research. Draw your own conclusions. I'm just someone who has been given access to people and information that I never in a million years would have dreamt I'd have. I have a duty to pass along to you what I think. Consider this information but do your own homework, too.

Lastly, I must touch upon the Iran drone thing. We all heard last weekend Iran claimed to have shot down an unmanned, U.S. spy drone.

https://www.washingtonpost.com/world/national-security/iran-says-it-downed-us-stealth-drone-pentagon-acknowledges-aircraft-downing/2011/12/04/gIQAyxa8TO_story.html?tid=pm_pop

Then, earlier this week I read this:

https://www.debka.com/article/21545/

I was incredulous. Could Iran really have been able to electronically "hijack" a U.S. spyplane? No way! Well, sure as shit, they did! Take a look at this:

https://www.usatoday.com/news/world/story/2011-12-08/iran-drone/51744902/1

First of all, for those who claim that debka is unreliable and full of shit...maybe not! I've always maintained that debka gets their info directly from sources within The Mossad. Therefore, the site must be read daily. Next and more importantly, the hijacking of a U.S. spy drone is extraordinarily bad news for the U.S. First, just the fact that it actually happened is bad enough. Then, the realization that U.S. military technology infrastructure can be so easily compromised is frightening. If you can hijack a drone, can you launch a missile? Lastly, I fear that this realization will force the U.S to retaliate, either directly or through the allowed action of Israel.

The point is...MENA war continues to get much closer to reality with each passing day and a war between the U.S., Israel and Iran would have serious, global implications.

We often talk about "when the shit hits the fan". Well guess what, between the euro crisis, rehypothecation and MENA war, the shit is hitting the fan right now. Whether or not it all grows into a massive, global shitstorm this week or this month, is irrelevant. It has started. We are in it right now and it's only going to get worse. Continue to prepare accordingly.

TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  232 Comments

Captain Silver
Dec 8, 2011 - 4:53pm

Thanks Turd!

Oh yeah, and FIRST!

pheeseas
Dec 8, 2011 - 4:53pm

Thursday, December 8,

Thursday, December 8, 2011

Jon Corzine Is Full Of Shit And A Liar

Jon Corzine has released the written testimony that he will make before Congress today. It has been highly polished up by his legal advisers and contains so many "I can't recall's" that even Bill Clinton would blush. While the entire testimony has very little credibility with regard to substantive issues, I just want to address one specific quote from the testimony because I know - for a fact - that Corzine is lying. From page 17 of the prepared testimony:
I did not, however, generally involve myself in the mechanics of the clearing and settlement of trades, or in the movement of cash and collateral. Nor was I an expert on the complicated rules and regulations governing the various different operating businesses that comprised MF Global. I had little expertise or experience in those operational aspects of the business.
Here's the full testimony: LINK If you take the time to read the full testimony, please try not to puke like I nearly did over the obvious lies and legally refined statements which are designed to obfuscate and cover-up the truth.

Now, earlier in the testimony, Corzine lays out his history of employment and experience in the securities industry. For much of his career, he was in oversight and management roles which would have required that he passed certain industry exams. One of them is the Series 24 principal's exam. Having just studied for and passed this particular exam, I know for a fact that the material covers the rules regarding "movement of cash and collateral." I spent a few hours making sure I understood exactly what the regulations prescribe. For Corzine to have been promoted into the positions he lays out in his testimony, it means he had to pass the Series 24 exam and he spent part of his time at Goldman having to deal with the issues from a practical standpoint covered by the material in the Series 24. In other words, he knows the regulations and mechanics and he's lying in his testimony.

Moreover, having worked as a trader on a big bond trading desk, as Corzine did at Goldman (he ultimately ran the Government bond trading operations at one point), I know for a fact he had to have been intimately aware of and knowledgeable about "back office" (the functions to which he refers to as "clearing and settlement") functions and mechanics. It would be impossible that he would have risen through the ranks at Goldman in the bond trading business and not have spent a good part of his of time understanding and dealing the "back office operations" of the securities trading business. Impossible.

Unfortunately for justice - but fortunately to prove my contention that he will extract himself from facing prison by exploiting the inability of Congress to ask the right questions - the people who will be grilling him, Senators and Reps, have no knowledge of how Wall Street functions and they will not take the time to figure out the right questions to ask. Nor will they make an earnest attempt to hold him accountable.

There's plenty of other statements that can likely be proved to be false. For instance he claims to have not made contact with NY Fed Chairman Bill Dudley during his time at MF Global. Those two worked together at Goldman Sachs. MF Global was admitted to the Fed as a primary dealer under Corzine. I find Corzine's statement therefore exceedingly difficult to believe. Let's see the phone and email records. But the best shot this country has seeing justice served against Corzine is having private lawsuits waged against him which will bring in expert witnesses to educate the courtroom and jury as to exactly why Corzine's testimony today is one big lie. Let's hope and pray that happens. Posted by Dave in Denver at 6:32 AM 22 comments Links to this post
Economical Disaster
Dec 8, 2011 - 5:04pm
tpbeta
Dec 8, 2011 - 5:06pm

I want my $25 silver...

..and I want it now. Come on Blythe, hurry the hell up. I need to get my fiat out of fiat.

Teach
Dec 8, 2011 - 5:06pm

FTSBTSFY

That's "F**k the system, before the system f**ks you."

cib
Dec 8, 2011 - 5:07pm

gold beatdown

So Draghi's comments this morning had nothing to do with this morning's selloff and all to do with what you are saying here Turd? Why did everything sell today? Its funny because Gold/silver have been trading with the market lately.

Santa's Elf
Dec 8, 2011 - 5:10pm

rehypothecation

Perhaps I'm overreacting, but the concept of rehypothecation and Turd's post today is without a doubt the scariest thing I've contemplated in months. Without a doubt, the ramifications of this are nothing short of catastrophic. I posted this some time ago and feel a repost is in order, so please forgive if you've read this before. These comments come from former Secretary of Agriculture, Ezra Taft Benson, back in 1967. His haunting words sound like they could have been penned today:

"The pending economic crisis that now faces America is painfully obvious. If even a fraction of potential foreign claims against our gold supply were presented to the Treasury, we would have to renege on our promise. We would be forced to repudiate our own currency on the world market. Foreign investors, who would be left holding the bag with American dollars, would dump them at tremendous discounts in return for more stable currencies, or for gold itself. The American dollar both abroad and at home would suffer the loss of public confidence. If the government can renege on its international monetary promises, what is to prevent it from doing the same on its domestic promises? How really secure would be government guarantees behind Federal Housing Administration loans, Savings and Loan Insurance, government bonds, or even social security?

"Even though American citizens would still be forced by law to honor the same pieces of paper as though they were real money, instinctively they would rush and convert their paper currency into tangible material goods which could be used as barter. As in Germany and other nations that have previously traveled this road, the rush to get rid of dollars and acquire tangibles would rapidly accelerate the visible effects of inflation to where it might cost one hundred dollars or more for a single loaf of bread. Hoarded silver coins would begin to reappear as a separate monetary system which, since they have intrinsic value would remain firm, while printed paper money finally would become worth exactly it's proper value--the paper it is printed on! Everyone's savings would be wiped out totally. No one could escape.

"One can only imagine what such conditions would do to the stock market and to industry. Uncertainty over the future would cause the consumer to halt all spending except for the barest necessities. Market for such items as television sets, automobiles, furniture, new homes, and entertainment would dry up almost overnight. With no one buying, firms would have to close down and lay off their employees. Unemployment would further aggravate the buying freeze, and the nation would plunge into a depression that would make the 1930s look like prosperity. At least the dollar was sound in those days. In fact, since it was a firm currency, its value actually went up as related to the amount of goods, which declined through reduced production. Next time around, however, the problems of unemployment and low production will be compounded by a monetary system that will be utterly worthless. All the government controls and so-called guarantees in the world will not be able to prevent it, because every one of them is based on the assumption that the people will continue to honor printing press money. But once the government itself openly refuses to honor it--as it must if foreign demands for gold continue--it is likely that the American people will soon follow suit. This in a nutshell is the so-called 'gold problem.” (The Teachings of Ezra Taft Benson p 639-640.)

33 and a turd
Dec 8, 2011 - 5:10pm

Corzine

Why has nobody asked why high profile customers got their money out when the getting was good?

sixdollarsilver
Dec 8, 2011 - 5:10pm

turd!

3rd!

[edit-doh!, go forth and multiply]

GoldMania3000
Dec 8, 2011 - 5:15pm

and the chinise are saying...

stupid westeners...they are buying their arses off

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